A Microfinance Institution with a Difference

Sanghamithra is a microfinance institution set up to promote self-governed institutions of the poor and be totally unlike the typical MFIs that are known to focus exclusively on financial sustainability and use strong arm methods for loan recovery. It works with self-help groups (11,000) and watershed management associations, in tandem with non-government organisations and other agencies to foster social and economic inclusion and self-reliance.
ALOYSIUS P FERNANDEZ
he microfinance sector has grown rapidly over the last decade in India. However, this has not been an unqualified success. There are two main models of microfinance in India: (a) the self-help group (SHG) model under the SHG-bank linkage programme (SHG-BLP); and (b) the microfinance institution (MFI) model. In recent years, the activities of the MFIs in particular have come under a lot of adverse criticism on account of the high rates of interest charged by them, zero tolerance of repayment delays, coercive methods of recovery of loans, exclusive focus on financial sustainability, low coverage of the core-poor and non-transparent ways of functioning. Several of these problems came out sharply in the Andhra Pradesh crisis last year [Ghate 2006]. At Mysore Resettlement and Development Agency (MYRADA)1 we have tried to work towards developing a different kind of MFI, Sanghamithra Financial Services that is committed to strengthening SHGs. We believe that while provisioning of credit through the MFI is important, credit can be productively absorbed only when it is enmeshed along with other development interventions. This paper will show that the absorption and use of credit can be made more effective if the MFIs are linked with SHGs. Emphasising partnerships, we will show how multiple agencies could work together, each playing a unique role in poverty alleviation. Hence, we argue that Sanghamithra need not become a single window for all financial services to the poor.

What We Mean by SHGs

Many MFIs claim that they work through groups. But the essential difference between these groups and SHGs is that in the SHG model, the loan is a single loan to the group as a whole, whereas the MFI tracks loans in the name of individual borrowers. The MFI uses group mechanism mainly to make recovery of loans easier. It hardly needs to be elaborated that these are not groups in the real sense of the term. Sanghamithra and MYRADA promote an SHG model where the group decides who the loan should be given to, for which purposes, on what terms and at what schedule of recovery. The locus of decision-making is shifted to the group, which provides the members with the opportunity to develop the skills to negotiate, to decide on what is manageable and feasible, to impose sanctions where required and to adjust repayment schedules if circumstances make the previously agreed-to schedule impossible to follow. The provision of credit is therefore not the only major objective; more important is to develop the members skills to manage finance (savings, credit and insurance). For MYRADA, it is not enough to teach the poor people to fish when they cannot reach the river. Economic and Political Weekly March 31, 2007

The obstacles on the way include caste relations, which are oppressive and exclusive, and force them to be dependent for their essential needs. Also, there is unequal gender relations. MYRADA highlights the need for sustained group action both at the level of each group as well as in federations to overcome these hurdles. Neither goodwill nor market forces will help the poor to reach the river the former is symbolic while the latter is exclusive, since it is based on economic power. The SHGs are civil society institutions of the poor and have the potential to implement policies that claim to promote financial, social and economic inclusion they are interrelated and intertwined; one cannot be achieved without the others. The SHGs also provide ample space for members to cope with the diverse patterns of dryland agriculture which are not accommodated by the standard sizes of loans and repayment schedules provided by banks. SHGs allow rescheduling of repayments in genuine cases where crops have failed and are willing to use their profits to write off genuine defaults. This is perhaps one reason why there are no suicides in the 12,000 SHGs promoted in MYRADAs projects. There are five pillars on which MYRADAs SHG strategy is built: (1) The strengths of the poor are recognised and they are encouraged to build on these strengths.2 Prominent among these are: (a) the willingness to save regularly if provided with a safe place and assured of ready access, and (b) the ability to sustain a group provided it is based on affinity which in turn requires an existing network of relations based on trust and mutual support. (2) An environment that recognises peoples initiatives of selfhelp and builds on it. For example, when groups decided to save and lend, they were free to decide on the purpose and size of loans and on the repayment schedule. When the bank-SHG linkage programme started in 1992, the RBI and NABARD accepted these basic features. They did not require the groups to lend only for asset creation or specify that loans had to be of a particular or viable size; they did not even require (against their legal experts advice) that the groups had to be registered, provided they functioned as all registered bodies are expected to.3 (3) Self-sustaining institutions, which set their own agenda and mission. The SHGs provide the members with a launching pad to gain confidence, skills and power to promote their interests. The members may decide to dissolve the group or to re-engineer the group. Many groups in MYRADA have done so after six years. Members are free to leave and to relate directly with financial institutions when they feel confident to do so. The groups are encouraged to federate if and when they decide that they require strength in numbers to change oppressive relationships, to lobby

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government or private institutions or to influence public policy or to provide or manage services like purchase of inputs in bulk, provision of marketing information and linkages and access to technical support. The community managed resource centres that have emerged in areas from which MYRADA has withdrawn are an example of the potential role that such federations can play. (4) Financial support through bank linkages for independent SHG promoting institutions and SHGs, which are self-managed (and have the potential to be self-sustaining). (5) Reduction of administrative support to manage the credit programme through lending to the SHG as a group. Since only one loan is given to a group, this reduces paper work and saves transaction cost of loans. The loan portfolio of Sanghamithra, which has lent to about 11,000 SHGs (of which 60 per cent are in MYRADA projects), is currently managed by only 35 credit managers. In its rural programme, one credit officer serves 187 SHGs and the outstanding per credit officer is Rs 82.25 lakh. In short, any view that reduces SHGs to financial intermediaries or makes them the last link in the delivery chain, which fails to understand their empowering role, fails to invest in the institutional capacity building4 of each SHG or which imposes on them a standard pattern of savings, lending and repayment undermines the basic structure of an SHG. Unless this investment in SHGs is made, one may achieve a limited degree of financial inclusion, but social inclusion and market inclusion will still remain elusive. The mechanisms of the financial system replicate the exclusivity of the market. To expect a financial system to be inclusive, therefore, is unrealistic. Other factors need to be brought into play policies, supportive implementing systems and pressure from below. Policies are relatively easier to put in place. Hence for policies to be implemented even partially it requires pressure from below this the empowered SHGs can provide. However, to enable the SHGs to perform their multifaceted, empowerment role, it is necessary that they are operationally and financially supported by other agencies, including MFIs. We now elaborate how Sanghamithra, the MFI supported by MYRADA, has played the supportive role to its SHG model.

What Is Sanghamitra?
Sanghamithra5 was promoted by MYRADA and incorporated as a not-for-profit company in February 1995 under Section 25 of the Indian Companies Act of 1956. Though Sanghamithra was deliberately set up by MYRADA as a separate institution, it shares the vision of MYRADA promoting self-governed institutions of the poor. The chairperson and several of the board members of Sanghamithra are from MYRADA. The intention of promoting Sanghamithra was that it would provide credit to SHGs (where the banks left gaps) formed by MYRADA in the first phase and then to SHGs promoted by other institutions, provided they met the performance criteria set by Sanghamithra. While, therefore, Sanghamithra functions independently with senior staff that have banking experience, MYRADA continues to guide it so that it continues to share and promote a common vision. Apart from lending to SHGs, Sanghamithra is also now lending to watershed management associations (area groups comprising all stakeholders in a micro watershed) formed by MYRADA and other NGOs.

Why a Separate Institution?

MYRADA was offered loans by several banks and by one government-sponsored MFI to on-lend to SHGs in the mid-1990s.

The reasons for this offer from banks were related to their priority sector lending requirements, to image building and to the need to reduce transaction costs involved in lending to SHGs directly. This also provided the banks with a degree of security since they held (often implicitly) the NGO responsible for repayments. NABARD supported this approach of the banks to use NGOs as intermediaries since it helped to achieve the ambitious targets set by government for the SHG-BLP. MYRADA at that time (and even today) was strongly promoting the SHG-BLP. While NABARD spared no efforts to persuade senior banking staff to promote the programme, at times branch mangers were just too comfortable in their box; some cooperative managers were transferred and succeeded by totally non-cooperative ones. Some major banks were responsive and even proactive; others woke up to the SHG-BLP as late as 2000. As a result, even in the so-called successful south, there were and still are large gaps in SHG-BLP. MYRADA decided that an alternative arrangement/institution was required, mainly to fill these gaps, to provide some degree of continuity in an area but also to introduce an element of competition between the alternative institution and the banks. MYRADAs position was that even if this institution was promoted, MYRADA would continue to promote the bank linkage programme. The assumption on MYRADAs part was that competition was required; it would serve to keep both the banks and the proposed institution (i e, Sanghamithra) on their toes. Subsequent experiences between 2000 and 2003 proved this assumption to be correct [Srinivasan 2004]. To fill in the gaps left by the banks, MYRADA had three management options: (1) to borrow money and lend through its existing extension staff and organisational structure using the same financial systems;6 (2) to borrow money and to lend under the name of MYRADA but to set up a parallel department within the organisation which would function separately from the programme department; the need to collaborate would be present, but the pattern and dynamics would be worked out in the field;7 (3) to set up a separate financial institution, with staff having experience in banking and finance, and an organisational structure that would ensure the institution shared MYRADAs vision and sought to promote this vision in its operations. MYRADA decided in 1993, after considerable thought and discussion, on the third option. The logic is as follows. The first option was rejected because while the financial systems in MYRADA were good and suited its needs of programme management, they did not suit the needs of an MFI. For example, MYRADAs systems were not generated or programmed to throw up the critical ratios that a professional MFI management requires to monitor performance. Besides, the culture of the NGO staff differed from what an MFI would feel comfortable with. Third, the general opinion was that MYRADAs image as an NGO would be compromised if it entered the business of lending money on interest. The current practice of NGO-MFIs both in other countries and increasingly in India was to lend at real rates ranging from 20 to 35 per cent, which was far above the acceptable rates expected from an institution like an NGO. The second option did not find favour since cross subsidisation in terms of services could not be avoided and this would not help to capture a correct financial picture of the microfinance initiative. Further, many in MYRADA suspected that the microfinance department would very soon take priority and overshadow the concerns and priorities of the social/development programmes (where the agenda and time of groups would begin to be dominated by financial issues to the detriment of social ones). Economic and Political Weekly March 31, 2007

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This left the third option, i e, that of starting a separate MFI. This had to face several hurdles as official policy in the mid1990s did not favour or support such initiatives. These matters took three-four years to resolve.8

Should the SHG or MFI be the Vehicle for Savings?

MYRADA believes that assisting the poor in protecting and growing their savings is a clear route to financial independence. When MYRADA started identifying and promoting SHGs and building their institutional capacities, the first activity promoted was regular savings. Loans were promoted only after six months of savings and institutional capacity training. As of December 31, 2006, MYRADA has promoted 10,475 SHGs. They have a total capital of Rs 138 crore of which Rs 60 crore is savings and Rs 33 crore interest earned from giving loans to members. MYRADAs experience over 20 years confirms that poor households want to save in cash provided the savings are in their control and safe. They are not inclined to invest their savings initially in banks even if they earn interest. The transaction costs to the poor in dealing with banks just to deposit small amounts of regular savings which is the only pattern of savings suitable to their lifestyle are too high. The priority concern for MYRADA is for the poor to have an institution in which they have confidence. In MYRADAs strategic approach, the appropriate institution is the SHG and not the MFI. The SHG members decide on how much to save and invest in the common fund of the group from which they extend loans, whether to reduce or increase the amount of weekly savings depending on seasonal cash flows, etc. Many SHGs offer interest to their members on the savings in the common fund. After functioning for 10 years, several SHGs have decided to distribute all or part of their common fund and to start over again, sometimes with several new members.

interest rate (including all costs of processing loan applications) of around 14 per cent declining. It would endeavour during the first few years to mobilise grants as well as loans from banks is such a mix that it would keep the cost of credit around 4 per cent. This would lower the pressure to grow too fast in order to achieve financial sustainability. After breaking even, it would allow interest rates to reflect the actual costs of borrowing. Even after the revision of its lending rates in recent years, it has been able to keep interest rates to around 15 per cent declining, which is still considerably lower than what MFIs charge normally.

Expansion Strategy
Sanghamithras expansion strategy in remote and neglected areas is tied to the existence of SHGs in the area and to investment from other sources focused on mitigating poverty. It does not expand into remote and neglected areas where no investment is being made or no SHGs exist. This approach is based on the understanding that while credit may be critical in many cases it does not suffice for the family to come out of poverty. It needs to be supported by major investments in these backward areas for various purposes: in all round development through government programmes (preferably where multilateral or bilateral agencies are involved since this assures some degree of continuity), improvements in the delivery systems and introduction of mechanisms that raise efficiency and productivity. If these major programmes are not operational, the second choice is to expand to areas where NGOs are promoting all round development as well as SHGs. This all round investment helps to open potential sectors (both on farm and off-farm), which the SHG members can exploit with the credit and other institutional support that the SHG provides. To provide credit in remote and neglected areas where there is no development investment is not an effective strategy and surely will not reach the poor. As far as investment required to reduce risk is concerned, one example may help. When MYRADA realised that the SHGs were giving large number of loans for dryland agriculture, MYRADA took up a major watershed management programme in the same areas. This reduced risk crops in these treated areas can now withstand a gap in rainfall of about 15-20 days; previously a gap of 7-10 days had reduced productivity considerably. An emerging issue here is the increasing evidence that marginal and even small farmers especially those in dryland areas no longer find agriculture a worthwhile occupation. Most of the youth of these families are out-migrating for non-farm jobs. Only the older generation is left behind to attend to the fields or to over-see lands leased out. As a result, the potential for growth of credit in agriculture especially for marginal and small farmers in drylands is limited. For example, a recent analysis of the purposes of loans given by 238 SHGs all in rural areas showed that out of a total of 5,880 loans (amounting to Rs 26 lakh) advanced to 3,558 members during one year (2003-04), the shares of agriculture and animal husbandry in total loan amount were 25 per cent and 12 per cent respectively. All other loans were for non-farm activities. The average amount lent for agriculture was Rs 4,173 which was the lowest when compared to averages of all other purposes except consumption (Rs 2,915). Sanghamithra also differs from other MFIs in its approach to growth and expansion. It does not seek to grow faster and faster; it slows down at the curves, and gathers speed warranted by the

Operational and Financial Sustainability of the MFI

There are three sets of activities involved in MYRADA/ Sanghamithras microfinance strategy. The first is the identification of proper SHGs. This is the role of an NGO with experience in participatory methods and institution-building. MYRADA involves people in a village to identify the poor and after introducing the approach, requests the poor to form groups of their choice. All these activities require to be subsidised and hence donor funds are required. The second is building institutional capacity of the SHG. Once again this needs to be subsidised usually by an NGO or government, though people do share some of the costs. The third set of activities includes advancing credit and managing repayments in SHGs. This can become self-sustaining within a short time. Sanghamithra restricts itself to the third set of activities. Part of its surplus is re-invested to promote the first and second set of activities.9 However, there is a crucial difference here between Sanghamithra and other MFIs. While being operationally and financially sustainable, Sanghamithra continues to function as a not-for-profit company. There was sharp criticism of this choice between 1995 and 2000. It was assumed that a not-for-profit company would function less professionally than a profit-making one. MYRADA and Sanghamithra proved that this assumption is not valid, since Sanghamithra was able to meet all its financial and operational costs in the third year of operations and has continued to do so yearly.10 Sanghamithra made it clear from the beginning that it would lend at an effective Economic and Political Weekly March 31, 2007

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external situation rather than that required by the internal organisational demands. What does this mean on the ground? Sanghamithra has a clear policy that it will enter an area where MYRADA and other NGOs have functioned for some years; it will lend to SHGs only if the local banks are not responsive. In Dharmapuri district, for instance, MYRADA alone had over 1,000 SHGs eligible for bank linkages, but very few were linked. Sanghamithra opened a branch there. Within six months, the bank managers who were aware of the success of Sanghamithras activities came forward to lend. The chairman of the bank visited Sanghamithras chairman and offered full cooperation in extending credit to SHGs. Sanghamithra, therefore, scaled down its involvement. A similar situation was encountered in Chitradurga district, where a very dynamic bank chairman increased the BLP by over 100 per cent enabling Sanghamithra to withdraw from SHGs and to look for other peoples groups that were functioning well. However, if the banks performance falls, as has happened in the service areas of some branches when the managers were transferred, Sanghamithra enters the area once again. Sanghamithras corporate policy is not to grow rapidly or to grow into a mammoth institution. It plans to target an outstanding portfolio of around Rs 30-35 crore and is planning its staff and supporting systems to manage this portfolio effectively and efficiently. MYRADA is currently planning to set up more Sanghamithras in its areas of operation. These will be supported and regulated by a fund management company that, it is hoped, will introduce and implement a regulatory mechanism, which is both institutionalised and distinct.

investment from private and public sources, there are often adequate opportunities and support services including linkages and market information without the need for NGO intervention in these areas. There are other instances of Sanghamithra fostering partnerships. It brought in Birla Sun Life, which came up with a good life insurance product that appealed to SHG members. The company relates directly with peoples institutions in areas where Sanghamithra is lending. The administration required to support the insurance policies is carried out by the community managed resource centres (which earn a commission) and not by MYRADA or Sanghamithra. Similarly, several insurance agencies have been brought in to cover animal insurance. Health insurance is now being explored. Mobilising and managing savings, as already mentioned, is a service managed by the SHGs themselves. Sanghamithra is looking forward to a situation where it can legally mobilise savings; if the SHGs, as a result of their interaction with Sanghamithra, have confidence that their savings will be safe if invested in Sanghamithra, it will be time to shift gear and perhaps morph into a different avatar.

Summing Up
The experience of MYRADA clearly shows that, while preserving their separate identities, the NGO and the MFI can be closely meshed so that a balance can be maintained between promoting a supporting environment for poverty eradication and a loan portfolio which includes activities that increase income through genuine business initiatives. It is this meshing that MYRADA and Sanghamithra have attempted to accomplish. What is common to both institutions (MYRADA and Sanghamithra) is the vision; both believe in building poor peoples institutions and to work with institutions of the poor, appropriate to manage finance.12 Over the past five years during which Sanghamithra has been functioning, there is ample evidence to show that these two institutions have been able to work to support one another, while maintaining their identities.13 Maintaining this balance is not easy. In substantial part, it has been made possible by the fact that several of MYRADAs senior staff are on Sanghamithras Board; and there is a regular exchange and sharing of reports. It also requires that Sanghamithra shares the vision of MYRADA while maintaining an independent mission. This again is not easy to achieve. Sanghamithra is under various pressures both from external sources (originating from various appraisals by rating agencies and individuals prior to being accepted as eligible for a loan from a financial institution), as well as from internal sources. These pressures can cause it to drift away from its original objectives. Maintaining this balance requires constant monitoring of Sanghamithras operations. For this, the following signposts guide the decisions of MYRADA and Sanghamithra: Credit is critical but can be absorbed productively only within a larger development context: While MYRADA does not promote microfinance, neither does Sanghamithra open branches except within a context of over-all development investment and growth undertaken by the NGO. Most of this investment is a grant. Peoples investment in cash is mobilised and their participation in planning, managing budgeting and implementing these activities and maintaining assets is critical. Within this context, Sanghamithra (or the banks) are brought in to extend loans.

Single Source Agency Syndrome

There is a trend for MFIs to get involved with a variety of financial services particularly savings, loans and insurance. Is it necessary for Sanghamithra to take on all functions? Sanghamithras position is that microcredit is necessary but not enough; supporting services are required. However, these supporting services need not be provided by the MFI; they can be provided by an NGO or come from the all-round growth in the area where the MFI operates. Other institutions more qualified and experienced can undertake these functions. An MFI could compromise its core functions by attempting to undertake too many. This is one of the reasons why Sanghamithra, even though it provides credit directly to SHGs, nevertheless enters into formal partnership agreements with NGOs promoting the SHGs as part of a broader development strategy. In the case of MYRADA for example, SHGs are formed in the context of livelihood support programmes such as watershed development, skills training, linkages with technical and marketing support services and animal husbandry, agriculture, horticulture and non-farm enterprise extension services. Since the risk mitigation measures and improved investment opportunities are created under the programme, credit linkages with banks or Sanghamithra enable greater livelihood security and enterprise development. Once it breaks even and earns a surplus, the MFI can provide funds to invest in certain of these support services (including management and skills training, market linkages and infrastructure development). In fact, it can even raise separate grants for this purpose provided there is clarity on end-use and separate tracking of such funds. This is exactly what Sanghamithra started to do after three years of functioning.11 In areas bordering small towns and cities which experience all round growth due to

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Credit alone is not enough but this does not mean that the Sanghamithra has to become the single-source agency for all financial services: Savings, insurance, marketing, capacitybuilding, linkages are equally important components necessary to sustain livelihoods. As we saw above, it is not necessary for Sanghamithra to take on all functions. Other institutions must be brought in. Growth in size of loan portfolio is not the major driving force or standard of performance: True, Sanghamithra had to achieve a certain size in order to achieve operational and financial selfsufficiency, which took it three years from the date it advanced its first loan. Now that this stage is reached, it would like to contribute to setting standards in good practices. A portfolio of Rs 30-35 crore outstanding which is what it intends to remain at for the moment may not make it a big organisation but it can still prove itself to be an effective organisation. There is no doubt that this came about solely because it was born as, and continues to be a sister concern of MYRADA. However, this influence extends only to providing the parameters for lending and growth; it does not compromise on the other banking practices needed to make it a self-sufficient organisation as long as it chooses to remain in the sector. Not competing but creating competitive conditions: MYRADA has endeavoured to push the SHG-BLP, while at the same time promoting Sanghamithra. MYRADA thus fosters competition in the sector because it believes that competition plays a critical role in ensuring the best service to the members of the SHGs. Consequently, Sanghamithra has been under pressure to keep its service charges (including interest rates) comparable to the banks and to provide better service at the doorstep. The results of this competitive environment during the past five years are evident. Banks in rural areas filled in the gaps they had left when they found that Sanghamithras loans were being repaid on time, they also increased the size of loans to match with Sanghamithra. Bank managers went to the SHGs and even to the houses of the SHG representatives requesting them to take loans, something unheard of till then. Sanghamithra on its part has had to keep its transaction costs down and to ensure that its services were friendly and at the doorstep in order to remain competitive. Whether this pressure from bankers to link with SHGs will continue in future given the increasing focus on profit and in view of the amalgamations of several regional rural banks, is a major concern at this time. High growth targets set by the MFIs tend to exclude the poor who cannot respond fast enough. High interest rates coupled with a short repayment schedule make most dryland agriculture activities non-viable. Harsh measures to ensure repayment put MFIs in the same box as many private finance companies. These, together, have given the MFIs a clear anti-poor image. MFIs would do well to re-assess their strategy. It will help their image if they keep salaries and operational costs at a lower level compared to for profit institutions; maintain interest rates comparable to the banks; plough back profits to strengthen the programme or peoples capacities to absorb more credit; scrupulously avoid strong arm methods or threats of any kind or violence to get repayments and transparently disclose all the terms and conditions of the financial services offered, including the source and costs of funds and utilisation of surpluses. A working marriage of financial sustainability and social objectives could exist if there is enlightened management and constant monitoring. EPW Email: myrada@vsnl.com

Notes
[I am grateful to P S Vijay Shankar and Mihir Shah whose incisive comments and suggestions have greatly improved the cogency of my argument.] 1 MYRADA is an NGO that manages 15 major projects in three Indian states and has major involvements in three others. It works directly with 1.5 million poor; Building poor peoples institutions is its short mission statement. Its major activities are promoting SHGs, watershed, water and wasteland management, forestry, community management of sanitation and drinking water, housing and habitat, etc. 2 This is a clear departure from the traditional approach to identify peoples needs as an entry point. 3 This is gradually being recognised as the most significant breakthrough in the financial sector anywhere in the world in support of microfinance for the poor through official institutions. 4 This is not a session where experts address a few hundred people. It involves several participatory sessions with all the members of one or at most two SHGs. The MYRADA training manual for Institutional Capacity Building of SHGs has 24 modules which can be collapsed into 14 spread over a year and a half and repeated when required. Of course, the initial capacity building makes this a high cost strategy. This is often criticised even by leading MFI leaders who have passed through prestigious institutes like the IIMs and IITs. They do not seem to realise that their education was high cost and even more highly subsidised. 5 Sanghamithra has two programmes: rural and urban. Cumulative disbursements of the rural programme as on September 30, 2005 stood at Rs 43.7 crore. Outstanding client SHG accounts is 4,116. One credit officer serves 187 SHGs; outstanding per credit officer is Rs 82.25 lakh. Cumulative disbursements of the urban programme as on September 30, 2005 stood at Rs 15 crore, outstanding SHG accounts number 2,946. One credit officer serves 120 SHGs. Outstanding per credit officer are Rs 68.60 lakh. 6 In fact, most NGOs in India who decided to receive funds in bulk and on-lend adopted this approach. 7 There were a few examples of this approach, the most notable one being BRAC of Bangladesh. 8 The publication Sanghamithra a MFI with a Difference records in detail the long process that eventually resulted in Sanghamithra being able to start lending operations in 2000. 9 It must be said that raising funds to identify affinity groups and to build their institutional capacity is becoming increasingly difficult. 10 Net operational surplus (after depreciation and prudential provisioning) of Sanghamithras rural programme is Rs 38.36 lakh; Operation Sustainability Ratio is 239 per cent, Financial Sustainability Ratio is 142 per cent, Financial Sustainability (including imputed cost of net owned funds at 6 per cent) is 120 per cent. For the urban programme Operational Sustainability Ratio is 106 per cent and Financial Sustainability Ratio 92 per cent. 11 FWWB (Friends of Womens World Banking) is another microcredit provider that has demonstrated a similar partnership approach that engages with its partners to create a supportive environment through capacity building, leadership development and linkage establishment where credit has a greater chance to be productively deployed and build sustainable livelihoods. 12 MYRADA also helps to build other types of institutions like the watershed management associations, gram sabhas, school management committees, water and sanitation committees, etc. Sanghamithra also lends to watershed management associations. 13 For more on this refer to Fernandez 2001.

References
Chambers, R (1994): Participatory Rural Appraisal (PRA): Analysis of Experience, World Development, 22 (9), pp 1253-68. EDA & APMAS (2006): Self-Help Groups in India: A Study of the Lights and Shades, Gurgaon, Hyderabad, CRS, CARE, USAID and GTZ NABARD. Fernandez, A P (2001): Putting Institutions First Even in Micro Finance. (2004): Community Managed Resource Centres MYRADA Rural Management Systems Series, Papers 38 and 15. (2004): Sanghamithra A Micro Finance Institution with a Difference, Sanghamithra Rural Financial Services, Bangalore. Ghate, P (2006): Mocrofinance in India: A State of the Sector Report, 2005, New Delhi. MYRADA (2006): Analysis of the Purposes of Loans in Myrada SHGs,Bangalore. The MYRADA Experience, A Manual for Capacity Building of Self-help Affinity Groups, (Third Edition), Myrada, Bangalore. Sriram, M S (2004): Building Bridges between the Poor and the Banking System, IIMA, SRRT, Ahmedabad. Srinivasan, Girija (2004): Impact Study, Sanghamithra.

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